The Cantillon Effect
Why the Rich Get Richer: How Consistent Investors Protect Themselves
Hello friends,
One of the most important lessons I’ve learned over decades in finance is this:
Money does not affect everyone equally — especially when new money is created.
This idea isn’t new. In fact, it was first documented over 250 years ago by Richard Cantillon, and it explains a truth many people feel today but struggle to name.
It’s called the Cantillon Effect.
Understanding it will change how you see inflation, asset prices, and why discipline matters more than ever.
What Is the Cantillon Effect? (Plain English)
The Cantillon Effect describes what happens when new money enters the economy:
Those who receive the money first benefit the most.
Those who receive it later face higher prices before higher incomes.
By the time new money reaches wage earners and savers, much of its purchasing power has already been diluted.
Simply put:
Who gets the money first matters.
How Money Enters the System Today
In modern economies, new money usually enters through:
Central banks
Governments
Large financial institutions
It flows first into financial assets — stocks, bonds, real estate, and businesses.
Only later does it reach:
Wages
Salaries
Fixed-income households
Cash savers
By then, prices have already adjusted upward.
Why the Rich Appear to Get Richer
This isn’t about greed or morality.
It’s about positioning.
Those who already own assets tend to see their wealth rise early when money expands.
Those who rely primarily on wages or savings feel the impact through:
Higher rent
Higher food costs
Higher insurance and utilities
Reduced purchasing power
Ownership moves first. Income follows later.
History Repeats — Always
This pattern has appeared repeatedly throughout history:
Early European banking expansions
Industrial credit booms
Post-war monetary stimulus
Modern quantitative easing
Each time:
Money expands
Asset prices rise first
Wages lag
Savers fall behind
Cantillon observed this centuries ago — long before modern politics or social media.
The ConsistentSam Perspective
Here’s where I take a different approach.
I don’t complain about the system.
I plan for it.
Money flows the way it flows.
The goal isn’t to fight it — the goal is to position yourself within it.
That mindset is what led me to build and follow the 50 / 35 / 15 Plan.
How the 50 / 35 / 15 Plan Helps
50% Income
Assets that produce cash flow help offset rising costs and give you flexibility when prices rise.
35% Growth
Owning productive companies means participating in long-term economic expansion rather than watching from the sidelines.
15% Speculative
A controlled allocation to higher-risk opportunities — capped, intentional, and never allowed to threaten the foundation.
This balance helps everyday investors avoid being crushed by inflation while staying disciplined through cycles.
Why Consistency Matters More Than Timing
You don’t need to predict policy.
You don’t need perfect market timing.
You don’t need inside information.
You need:
Ownership
Time
Reinvestment
Consistency
Over time, this is how ordinary investors quietly overcome the Cantillon Effect.
Final Thought
The system isn’t always fair —
but it is understandable.
Those who learn how money moves can adapt calmly and deliberately.
Those who don’t often work harder yet feel further behind.
My goal with this newsletter is simple:
Help you understand the system — and build a plan that works with it, not against it.
Stay consistent,
Samuel F.Lilly
The Consistent Investor
Disclaimer
This newsletter is for educational purposes only and does not constitute financial advice. Examples are illustrative and not personalized recommendations.